WASHINGTON (Reuters) - The Bush administration is debating
whether to embrace a mandatory system to control U.S.
greenhouse gas emissions and could make an announcement as
early as this week, industry sources said on Monday.

It was unclear what form the new plan could take, said the
sources, who spoke on condition of anonymity due to the fluid
nature of the deliberations.

"Clearly, the White House is weighing some new options for
addressing climate policy beyond the approaches it has taken to
date," one industry source said. "All signs suggest that
something is in the works."

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Whether the proposal, which could be made in the form of
legislation submitted to Congress, would take a cap-and-trade
approach to greenhouse gas emissions remained to be seen,
sources said.

If President George W. Bush throws his support behind
mandatory carbon dioxide regulations, it would be a major
departure from his long-held insistence that placing binding
caps on emissions would harm the U.S. economy.

White House spokeswoman Dana Perino declined on Monday to
confirm rumors that White House action was imminent, though she
steered clear of ruling actions out.

Bush is scheduled to speak on Thursday in the White House
Rose Garden to recipients of the President's Environmental
Youth Awards. Also, administration officials later this week
will participate in international climate change negotiations
in Paris.

The U.S. Senate is expected to take up mandatory climate
change regulations in June.

The United States is the world's biggest greenhouse gas
emitter, but the Bush administration to date has adamantly
opposed mandatory regulations, citing inaction by other major
emitters, like China and India.

Jeffrey Holmstead, an attorney with Bracewell and Giuliani
LLP and a former Environmental Protection Agency official, said
the White House was not "on the verge of a fundamental shift"
in climate change policy.

"I don't think that anyone should be holding their breath
waiting for a dramatic new cap-and-trade proposal from the
administration," Holmstead said.

Last week, White House officials met with Republicans in
Congress to weigh climate change options -- the first such
meeting that Republicans have held on the issue.

Perino declined to rule out the possibility that Bush could
support a cap-and-trade approach to controlling greenhouse gas
emissions.

"We are not necessarily against cap-and-trade proposals,"
Perino said, noting the administration has supported such
efforts as a way of controlling harmful air pollutants from
coal-fired power plants, such as sulfur dioxide and nitrogen
oxides, precursors to acid rain and smog.

However, Perino noted that cap-and-trade programs "can be
very complicated" and said "what we have seen so far from
Congress is not something that we can support."

Perino warned of an impending "regulatory train wreck," if
the White House and Congress failed to clarify overlapping
regulations in the Clean Air Act, Endangered Species Act and
the National Environmental Policy Act.

"We're heading down a path that we believe is not
reasonable nor sustainable, would hurt our economy and is not
good public policy," Perino said.

Sources say Bush administration officials have been
increasingly active in reaching out to Democrats and
Republicans on Capitol Hill to weigh potential options.

Sen. Harry Reid, the Senate's top Democrat, has indicated
he wants the chamber to debate climate change legislation in
June.